Bitcoin (BTC) is falling sharply to reach lows of the beginning of November, leaving behind the bull run that boosted Donald Trump’s victory as a series of factors are causing risk-averse sentiment among investors.
The largest and longest-standing cryptocurrency declined just over 8% in a 24-hour period on Tuesday morning (EDT) to trade at a low of $87,190, its lowest price so far in 2025, before a modest recovery.
The larger cryptocurrency market replicated the bearish movement, with some major altcoins like Ether (ETH), XRP and Solana (SOL) recording even more severe price reversals of up to 15% in the period. ETH, the second largest cryptocurrency, fell just over 10% to below $2,400, while XRP and SOL racked up losses of 19% in the week.
The global cryptocurrency market capitalization fell below $3 trillion, dropping 9% in 24 hours to $2.86 trillion at the time of writing, according to CoinMarketCap.
In the derivatives market, liquidations surged to $1.5 billion, affecting nearly 390,000 individual traders. Most liquidations were long positions, while short positions accounted for only $121 million, as reported by Coinglass.
Trump Tariffs and Economic Instability
Bitcoin’s price volatility marks a setback from its previous surge of over 50% after Trump’s victory, reaching an all-time high of just above $109,000 in January when he began his second term.
Despite Trump’s pro-crypto stance, political and economic uncertainty has weighed heavily on the asset class. The U.S. president’s announcement on Monday of impending tariffs on Canada and Mexico had an immediate negative impact on the market.
“Trump’s combative stance against geopolitical allies and rivals is shaking investor confidence, and concerns about high inflation persist,” Bloomberg reported on Tuesday. Additionally, the prospect of an extended pause in Federal Reserve rate cuts is contributing to risk aversion.
This sentiment has also affected traditional markets, with the Nasdaq index and the S&P 500 dropping by 1.4% and 0.5%, respectively. The Nasdaq 100 technology index has now lost almost 4% over the past five days, according to Google Finance.
Widespread Risk Aversion
Geoffrey Kendrick, global head of digital asset research at Standard Chartered, noted that heightened risk aversion in traditional markets has spilled over into the digital asset sector.
This decreased risk appetite is reflected in the strengthening of the Japanese yen against the U.S. dollar, fueled by expectations of further rate hikes from the Bank of Japan, according to CoinDesk.
For cryptocurrencies, this is mirrored in the Crypto Fear and Greed Index, a key market indicator analyzing social media activity, volatility, trends, and prices. The index recently hit a five-month low of 25, reflecting widespread fear.
Mixed Scenario Within Crypto
Beyond macroeconomic factors, several industry-specific developments are fueling the bearish trend. Notably, three U.S. states recently rejected proposals for Bitcoin reserves, impacting market sentiment.
Proposals in Montana, North Dakota, and Wyoming failed, highlighting political risks associated with cryptocurrency adoption. Establishing a federal Bitcoin reserve has been one of Trump’s most anticipated promises for the crypto community.
Additionally, a major hack at Bybit and a political scandal involving Argentine politician Javier Milei over a Solana memecoin have exacerbated market woes. The latter incident has been particularly damaging for Solana, which is struggling with a series of losses tied to collapsing meme tokens within its ecosystem.
Outlook: Caution Advised Amid Market Volatility
Despite the current downturn, some favorable regulatory developments have emerged. The U.S. Securities and Exchange Commission (SEC) recently agreed to drop litigation against several cryptocurrency companies, including Coinbase, which initially sparked a brief market rally. However, this optimism was overshadowed by the $1.5 billion attack on Bybit.
Analysts suggest the digital currency market could rebound later in the week following key economic data releases from the Federal Reserve. Nonetheless, caution is advised in the short term.
“Don’t buy the dip yet; a downward move of BTC to $80,000 is underway,” warned Kendrick.
At the time of publication, Bitcoin was trading around $89,200, reflecting an 18% decline from its all-time high last month.
